It was inevitable. Fueled to a large degree by worst-case scenarios, the CFPB has been carping about the markup on F&I products for some time. NADA’s timely response was the recent release of its Voluntary Protection Products Dealership Policy, a part of its Driven Management Series. No question, equitable customer treatment remains the universal top priority.
Still, the timing couldn’t be worse. Vehicle sales are tepid at best; the increase in the cost of credit leaves fewer car payment dollars available for owner protection products.
If the intent is to serve the greater good, then it is incumbent upon those engaged in vehicle funding and owner protection product marketing – certainly funding sources who also offer voluntary protection products – to proactively implement the action necessary for themselves and their dealer clients to capitalize on the new marketing parameters. Some timely tips:
1. Conduct aftermarket product reassessments in every account. Faced with the threat of reduced F&I income, dealers will be open to innovative ways to recoup the lost revenue. This creates an opportunity to not only reevaluate the products you are currently providing, but those supplied by your competitors. Since volume is driven by both price and benefits, your objective is to identify cost-effective, feature laden alternatives that will work in the account. If you’re lucky – you’ll find some with greater value than those provided by a competitor offering similar products in the same store.
2. Capitalize on the available technology and current customer demographics to pre-sell aftermarket products. Research shows that the longest period of customer downtime occurs during the transfer from sales to F&I. I would program some tablets with the benefits of aftermarket products offered by the store. No prices are posted; it’s an information and customer-preference tool.
The salesperson hands the customer a tablet after he signs the buyer’s order. In the interim, the customer reviews what’s available, noting his interest in learning more about a product or service. The F&I person collects the tablets at the T.O. and is alerted to the products of interest. It is Millennial and Gen Xer friendly.
3. Increase the major component coverage VSC deductibles. If I were still in the VSC administration business, I’d increase the deductible amounts to $500 and $750, if it would allow me to reduce the wholesale price of the impacted plans. The increase is in sync with inflation and should reduce both the claim frequency and loss costs. A lower purchase price to the customer should generate a few more sales each month.
4. Launch sponsored in-store aftermarket product contests with the emphasis on number of units sold. The Chicken Little “the sky is falling” syndrome affects all of us. Properly constructed contests of sufficient duration can effectively and positively modify behavior.
If in the future, consumers pay less for their owner protection coverage – which in turn allows more consumers to opt for the programs – the consumers, regulators and F&I cadre will be happy – and the dealers will smile all the way the bank.